The paper “ Management Issues Faced by Fonterra” is a fascinating example of the research proposal on management. Currently, the biggest problem being faced by Fonterra is the unwillingness of the farmers who are majority stakeholders, to restructure their Cooperative body so as to enable the Company to go public and expand its capital base by inviting outside investment. The Chairman and the CEO of the Company have represented on several occasions and forums about the necessity for expansion of the capital base of the Company, so as to exploit its strong consumer base and credibility in the international market.
It’ s a big achievement for the company to have allowed prices of its milk products to increase steadily keeping in line with price increases in other sectors thus enabling its shareholders to have a constant stream of good returns. The Company remains strong and the senior management is of the firm belief that currently farmers who are only benefiting from short term cash flows, can multiply their earnings in the long run if the economies of scale can be further employed to their advantage.
With outside financial participation, although the share of the farmers will be diluted to some extent initially, eventually they will be the biggest gainers. In today’ s business world the maximum returns emanate from volumes and this is possible for Fonterra if more finance is generated and resultantly foreign markets are tapped for supply and sourcing of milk products. It’ s the belief of the senior management that this is the biggest issue and problem faced by Fonterra today and if solved, the Company stands to gain immensely by way of an increase in gross revenue and better market presence.
This problem is actually the difference between a situation that is desired and that is actually present at a given time. We now need to find a solution to this and since the problem stands identified, sure there is a logical and feasible way to find the solution that will ultimately benefit all concerned and the Company in particular. There are several ways to find a solution to any given problem, provided the cause of the problem and options available under the circumstances are understood at the given time.
Thereafter decisions need to be taken by people at the helm of the affairs so that the results are acceptable to all concerned and which obviously lead to a bigger bottom line. It is very well known that Fonterra is a company that has a stable and a long history of good profitability, has a strong and credible market presence, and is constantly involved in measures that amount to taking proactive decisions for the long term betterment of the company as also keeping in track with world trends to maintain the ecological balance, addressing proper energy usage, and always striving for sustained growth.
It is also the world’ s largest exporter of dairy products and accounts for 1/3rd of world dairy products trade. A company of this stature surely has the means and inclination to solve problems in line with the interests of all concerned and in particular for its shareholders, majority of them being the local farmers whose individual stakes in the company are very significant for them. Hence whatever solution that has to be arrived at must primarily address the issues of the farmers.
The fact that they are reluctant to allow outside financial participation due to inherent fears that have built up in the long run, is sufficient reason for the management of Fonterra to adopt all possible means to satisfy and convince the farmers of the impending implementation of the new proposal. For the long term betterment and stable growth and profitability of the company, and in view of the changing global patterns, the best management techniques demand that innovative measures be taken to meet the challenges created by the new emerging economies.
Theoretically, we need to recognize the need to solve the problem, determine the causes of the problem, decide what is the required result in the future, consider the possible solutions and choose the best one, and finally implement it for our purpose. It is also known that to decide the aforesaid options we need the management to make the right decisions for which they should understand thoroughly all concerned issues, collect the required data and be capable and strong enough to take the appropriate risks.
Group decisions, which in this case will be the board of directors of Fonterra, are the best available options to solve problems of this intensity. Since taking the right decision by Fonterra will set in motion the stream of actions that will start the problem-solving process, it is implied that we consider some techniques for the management to take decisions which are, brainstorming, Delphi technique and nominal group technique. In brainstorming the group leader outlines the problem, members suggest the actions to resolve the problem, and the various resultant options are recorded for discussion and analysis.
In the Delphi technique, a consensus to the solution is reached by way of a series of questionnaires passed to the experts amongst the members after repeated exercises for every possible solution. In the nominal group technique, the members come out with their ideas on the issues with possible solutions, clarify their ideas amongst each other, give scores to individual ideas after detailed deliberations and select the solution with the highest score. To solve the current problem of Fonterra the best technique to use is that of brainstorming.
The main issue being of farmers who constitute the majority amongst the shareholders, it is essential that every aspect of their concern be discussed from their point of view so that whatever the consensus, it should be acceptable to them. Since they are unsure of long term proposals and are mainly concerned with short term cash flows, a via media that initially meet this demand be considered. If the Company goes public, its credibility, strong financials, and a good reputation will ensure that its stock listing will shoot up the moment it is listed, thereby winning over the farmers initially and setting the course for more innovative measures.
Gradually the confidence of the farmers in the new system will go up and they will be more open to changes. This will enable Fonterra to steer clear of the hurdles being faced currently. Sure the solution is possible.